Hostile wind to float golden parachutes at Six Flags

August 28, 2005|By Jay Hancock

DON'T CALL IT sweet surrender, but the impending capitulation of Six Flags Inc. to the assault of Washington Redskins owner Dan Snyder does not come without rewards for the theme-park company's incumbent managers.

There is, for example, the opportunity for them to talk trash about the person who single-handedly accomplished what they couldn't do for a year: get the stock over $6.

Last summer, as Six Flags shares plunged toward $3.49, Chief Executive Officer Kieran E. Burke blamed the company's poor results on bad weather and a bad economy and said, "We still hope to grow the business modestly."

They did, but not enough to make much difference. It took Snyder's hostile tender offer on Aug. 17 to bring the stock to life, and it rose even higher Thursday after Six Flags said "uncle" and agreed to sell the company. Shares closed at $6.99 on Friday.

This has increased the wealth of shareholders by $140 million as the market anticipates the acquisition price, but Six Flags bosses are strangely ungrateful. Six Flags director Michael Gellert accused Snyder of "seeking to acquire effective control of the company without providing value to all stockholders."

Heckuva nerve, Mr. Gellert. The main obstacle to value for stockholders was you and your team, which has been losing money for years and which had blocked Snyder from a full takeover. Snyder would probably have loved to buy all Six Flags stock, but until now he couldn't even make an offer for it because of a "poison pill" adopted to entrench current management.

Now he'll probably seize the chance, which will give Six Flags executives their second bonus: golden parachutes.

CEO Burke and Chief Financial Officer James F. Dannhauser will be eligible for millions in severance if Snyder or anybody else takes over, including three times annual pay and bonus and accelerated stock vesting. Plus they can live somewhere besides Oklahoma City, Six Flags' headquarters.

Making all of the Six Flags white ones brings another advantage: the company's board and managers will avoid what would have been a humiliating proxy-fight loss.

The $6.50 tender offer by Snyder's Red Zone investment company was contingent on kicking Burke and two others off Six Flags' board and replacing them with Snyder, Virginia homebuilder Dwight C. Schar and Mark Shapiro, the outgoing ESPN programming boss recruited by Snyder to run Red Zone.

I can't imagine that it wouldn't have succeeded.

The people running Six Flags don't own much of its stock. Snyder, on the other hand, has 12 percent. Cascade Investments, Microsoft's Bill Gates' vehicle, owns 11 percent. Mutual fund giant Fidelity Investments and three other institutions collectively own another 30 percent.

If you had to vote, whom would you have chosen? The people who lost $700 million and cut shareholders' equity in half the past five years? Or the guy who, it was revealed a week ago, has nearly doubled the Redskins' revenue to $300 million since 1999 even though the team has had only one winning season?

Thought so.

Which brings us to the next blessing for Six Flags' superintendents.

If Snyder takes over they can stop pretending that selling off properties and relicensing the Looney Tunes characters is a turnaround strategy. The aging Bugs Bunny is not going to save the company. How about Shrek?

Or Joe Gibbs?

It's unclear what Snyder would do with Six Flags, but analysts have noted that many Six Flags parks - including the one in Prince George's County near the Redskins' FedEx Field - are near National Football League stadiums and that cross-marketing opportunities might exist. Snyder's proxy solicitation suggests teaming Six Flags with cell-phone, credit-card and food companies to pitch products to the millions of annual park visitors. These are the sorts of deals that have worked at FedEx Field.

But the few public statements by Snyder and Shapiro suggest grander ambitions. They speak of Six Flags becoming a diversified entertainment company, "and movie studios aren't a total pipe dream," Shapiro told The Washington Post.

Six Flags questions whether Snyder has "a serious interest in pursuing an acquisition of the entire company." Come on. Would Shapiro have quit his job at ESPN if he didn't?

It's true that somebody is probably bluffing in this contest. But I don't think it's Snyder.